July 20, 2023

Minnesota Bankers File Lawsuit Against FDIC

The Minnesota Bankers Association and Lake Central Bank filed a lawsuit today against the Federal Deposit Insurance Corporation over its Unfair or Deceptive Acts or Practices Act position concerning nonsufficient funds fees for represented items. The case was filed in the U.S. District Court in Minnesota, which is part of the 8th U.S. Circuit Court of Appeals. Missouri is part of the 8th Circuit.  

The complaint outlines several strong claims against FDIC, including major failures to adhere to the Administrative Procedures Act. Specifically, the lawsuit claims the FDIC did not have authority to amend existing bank disclosure regulations and did not have authority to issue a substantive UDAP rule. Even if the FDIC did have authority to take those steps, the lawsuit claims the agency failed to follow the mandatory rulemaking process in the Administrative Procedure Act, which is the federal law that ensures that government agencies operate in a fair and transparent way.

“This is a very positive step for our industry, and I applaud our colleagues in Minnesota for leading the charge against what is one of the most overt overreaches of authority we have seen from FDIC,” said MBA President and CEO Jackson Hataway. “We fully support this measure and are prepared to engage in whatever way we can to assist Minnesota.”

MO Banker Tells Lawmakers Beneficial Ownership Registry Must be Fully Accessible to Banks

During testimony at a House subcommittee hearing Wednesday, a Missouri banker said the Financial Crimes Enforcement Network’s implementation of the Anti-Money Laundering Act of 2020 must be done in line with congressional intent.

Pete Selenke, vice president and AML/BSA officer for Central Bank in Jefferson City, expressed concerns about FinCEN’s beneficial ownership rulemaking to members of the Subcommittee on National Security, Illicit Finance, and International Financial Institutions. The subcommittee is chaired by Congressman Blaine Luetkemeyer, who has criticized FinCen’s rulemaking for deviating “from congressional intent by allowing beneficial owners to withhold identifying information.”

Testifying on behalf of the American Bankers Association, Selenke raised concerns about the database of beneficial ownership registry that FinCEN is required to create pursuant to the Corporate Transparency Act, a key part of AMLA.

“Congress explicitly intended for the beneficial ownership information included in the registry to be accessed by banks, with their customers’ consent, for purposes of complying with the ‘customer due diligence’ requirements under applicable law,” Selenke said. “This directive is broad and clear. However, in the proposed rule FinCEN issued last December, the use restrictions FinCEN placed on this information make this beneficial ownership registry information useless to banks.”

He added that limiting the use of this registry information so severely could cause banks to simply choose not to use this information at all.

“We do not believe this is an outcome Congress or FinCEN intended, and it is certainly not what banks want,” Selenke said.

Selenke also urged the federal government to ramp up efforts to educate the newly regulated public about the forthcoming rules, especially given the significant penalties for noncompliance.

“If our customers do not know about the rule, they will not know they need to comply with it, which means they will be in a position to violate the rule,” Selenke said. “We take care of our customers, and we think of them as the good guys. The last thing we want is to see any rule risk turning good guys into bad guys because they failed to comply with a law they were not aware existed.”

Earlier this year, MBA joined state bankers associations urged FinCEN to withdraw its proposal, calling the proposal “fatally flawed.”

“We are proud to have Pete represent the banking community in expressing our concerns about FinCEN's beneficial ownership rulemaking,” said MBA President and CEO Jackson Hataway. “We thank Congressman Luetkemeyer for his leadership to bring this issue to the forefront of Congress.”

Federal Reserve Launches FedNow^® Service

The Federal Reserve today officially launched its FedNow^® service for instant payments. Banks of all sizes can sign up and use the tool to instantly transfer money for their customers at any time of day, the agency said. As an interbank payment system, FedNow^® will operate alongside other Fed payment services such as Fedwire and FedACH.

The Fed previously announced that more than 50 early adopters would be able to use FedNow^® on launch, including 16 service providers that support payment processing for banks and credit unions. When fully available, instant payments “will provide substantial benefits for consumers and businesses, such as when rapid access to funds is useful, or when just-in-time payments help manage cash flows in bank accounts,” the agency said.

Senators Introduce ACRE Legislation

Sens. Jerry Moran, R-Kan., and Angus King, I-Maine, have introduced the Access to Credit for our Rural Economy Act. Supported by the banking community, ACRE Act would make it easier for farmers, ranchers and rural families to access low-cost credit. The bill was introduced in the House earlier this year by Reps. Randy Feenstra, R-Iowa, and Wiley Nickel, D-N.C.

The ACRE Act would give community banks the same tax-exempt status on certain earned interest that applies to farm credit institutions, allowing farm real estate borrowers and rural homeowners access to lower interest rates. The exemption would also apply to single-family home mortgage loans in rural communities with fewer than 2,500 residents and for mortgages less than $750,000.

ACRE mirrors the mirrors the Enhancing Credit Opportunities in Rural America Act, known as ECORA, that was introduced in the last Congress. MBA President and CEO Jackson Hataway previously shared ACRE will provide critical economic support to rural communities.

“MBA is working with our congressional delegation to sign on to support this bipartisan measure, and we encourage our members to let their representatives know how this bill will benefit their customers and rural communities,” Hataway said.

Trade Groups Support Limits on Nonfederally Regulated Lenders in 7(a) Program

The American Bankers Association, National Association of Government Guaranteed Lenders and four other bank and credit union trade associations expressed appreciation for Senate legislation rolling back recent policy changes made to the 7(a) loan program by the Small Business Administration, including the agency’s decision to lift the moratorium on the number of nonfederally regulated lenders in the program.

SBA issued final rules in April that eliminated limits on nonregulated fintechs and other lenders in the program while also loosening underwriting standards. Senate Small Business Committee Chairman Ben Cardin, D-Md., and Ranking Member Joni Ernst, R-Iowa, drafted legislation that would cap the number of nonfederally regulated lenders at 17; impose higher underwriting standards, particularly for 7(a) loans of $350,000 and above; and impose other guardrails on the 7(a) program. In a joint letter, the associations expressed support for the committee’s efforts to advance legislation to respond to SBA’s final rules.

As previously shared, MBA opposes SBA’s lifting, without limit, the moratorium on the number of nondepository institutions that can become 7(a) lenders while at the same time loosening underwriting standards.

“Banks are best positioned to provide services to underserved small businesses, and the success of the current SBA 7(a) program proves this,” said MBA President and CEO Jackson Hataway. “Banking is a highly regulated industry, and there are no assurances that nondepository institutions will have to meet the same regulatory standards.”

ABA Launches Check Fraud Claim Directory

The American Bankers Association has created an online Check Fraud Claim Directory to help banks resolve check fraud claims more efficiently. The directory lists contact information for banks that need to file a check warranty breach claim with another financial institution. It is searchable by bank name, city, state or FDIC number, so banks can find the right contact at the institution to help resolve a warranty breach claim.

To access the directory, banks will need to provide their detailed contact information and any documentation requirements for submitting a claim. (To the extent possible, banks should provide contact information that will not be affected by personnel changes within the institution.) The directory is available to both ABA members and nonmembers, and ABA is encouraging all banks to participate to maximize the utility of the resource.